Taste of things to come or much ado about nothing?

ANALYSIS:AFTER TWO hours of Franco- German talks, yesterday's press conference in Paris passed by in a cloud of buzzwords.

Debt brakes, corporate tax harmonisation, euro zone governance: to the jaded European ear, it sounded like deja-vu all over again.

In the mid-August drought, news media had elevated yesterday’s Franco-German meeting to the level of a quasi-summit. All that was ever on the agenda, though, were Franco-German proposals; in the end, they were both the taste of things to come in the euro zone and much ado about nothing.

French president Nicolas Sarkozy was anxious to show Paris and Berlin’s continued momentum on saving the euro zone even if last month’s summit proposals are still a work in progress. Bridging the summer gap between political and autumn parliamentary approval was the order of the day, as was deflecting market attention away from their French jitters.

It was hard to think of a better backdrop for yesterday’s Franco-German talks than the Elyseé Palace. Cloaked in scaffolding, it is as much of a building site as the euro zone in general and the French economy in particular. The difference for France is that when the workers are done, the Elyseé gold leaf will gleam as new while the only thing gleaming in future French budgets‚ if Sarkozy has his way, will be the “golden rule”.

A French version of Germany’s debt brake, the French leader wants to end three decades of deficit spending by putting fiscal discipline beyond party politics into the constitution.

Berlin has already agreed such a measure, thus the tone of yesterday’s press conference was clear: what’s good for the German goose is good for the French gander and, both leaders insisted, the rest of the euro zone flock, too.

The debt brake proposal was a win for German insistence that austerity measures are the best way to tackle the root of euro zone weakness and market unease. Merkel 1: Sarkozy 0.

Then, in an elegant return volley, the French president announced their wish for at least twice-yearly “euro zone governance” meetings.

Germany has tried to head off this French proposal for years, fearing the consequences for EU cohesion of too many circles within circles.

It appears to have given up its resistance to the idea – not for the first time – but only if European Council president Hermann von Rompuy heads the new body for the first 2½-year term.

It remains to be seen what form their proposal will take and what it means for Luxembourg’s prime minister Jean-Claude Juncker, the long-serving Ecofin head who has fallen out of favour in Paris and Berlin.

Further proposals followed: financial transaction tax, closer Franco-German budgetary co-ordination through their finance ministries – and then it came: a Franco- German proposal to boost competitiveness by co-ordinating corporation tax.

Less than a month after Enda Kenny announced “c’est fini”, the prospect of further corporate tax wrangling emerged on the horizon.

Angela Merkel was anxious to present this idea as a strictly bilateral Franco-German measure to boost competitiveness in their neighbouring economies.

In that reading, harmonising tax was just one of many measures that have been announced many times in the past and have yet to be enacted.

Sarkozy however struck a different tone, promising Franco-German corporate tax harmonisation proposals for next month and implementation by 2013.

As the meeting concluded, smelling of team spirit, the nagging feeling returned of two leaders still talking past each other.

Sarkozy repeated his talk of “ambitious” Franco- German proposals for all of the EU – emphasis on ambitious timeframe – now while Merkel is still talking about a long-term process of convincing euro zone countries to take their austerity medicine.

On two points, however, there was no room for anything to get lost in translation.

The first unmistakable point is that if Paris and Berlin get their way, eurobonds will only ever come as a medium-term reward for further fiscal and economic integration efforts. Germany and France will, they insisted, never back eurobonds as a get-out- of-debt card for today’s troubled euro zone economies.

Such a move would allow the peripheral nations to raise funds using the core’s triple A ratings.

That will be music to the ears of Merkel’s Christian Democrats (CDU) and Free Democrat (FDP) coalition partners.

They were gearing up for a feisty parliamentary party debate next week over euro bonds.

Now some want to have another go in the euro zone at automatic sanctions for breaches of the stability pact, rather than leaving them to the political discretion of European Council leaders.

Yesterday’s proposal for a deficit ceiling and pan-EU debt brake will go some way to satisfying those demands.

The second point was equally clear: yesterday’s Franco-German proposals are, as Sarkozy put it, a programme to “break with old habits” of deficit spending that have crippled the euro zone.

To do that, France and Germany believe it will be necessary for euro zone members to break with other cherished European habits: fiscal and budgetary sovereignty.

So how much influence will yesterday’s Franco-German proposals have over any future EU-wide agreement?

“With Italy and Spain under the microscope now,” said one senior government official in Berlin, “we feel we have the negotiating advantage on our side this time.”